SKF Nine-month report 2014

2014 October 15, 13:00
CEST

Tom Johnstone, President and CEO:
”Demand was slightly lower than expected during the quarter, particularly in Europe and within our automotive business. As a result manufacturing was adjusted lower than planned at the start of the quarter impacting our results but ensuring we also reduced inventory in fixed currency. Cash flow, at over SEK 1.4 billion, was strong and we continue to focus on reducing net working capital. This work will intensify during the fourth quarter and into the coming years as we take specific steps to address the different areas within net working capital.
We continued to take a number of important orders, launched a number of new products and also announced the establishment of a new Global Technical Centre in North America. When up and running at the end of next year it will complete our planned network of two Global Technical Centres in each major region of the world.
It is almost one year since we acquired Kaydon and their growth and profit development has been very positive since the acquisition. The integration is running fully in line with our plans in terms of sales and cost synergies.
Looking forward we continue to operate in an uncertain business environment which may even have worsened slightly in Europe in the last months. As such we expect demand for our products in the fourth quarter to be relatively unchanged both sequentially and year on year and will run manufacturing a little lower than sales to further reduce inventories.
I have earlier advised that I will step down as President and CEO at the end of this year and the Board
has chosen Alrik Danielson as my successor from 1 January whom I warmly welcome back to SKF.”

Key figures

Q3 2014

Q3 2013

YTD 2014

YTD 2013

Net sales, SEKm

17,787

15,623

52,476

47,167

Operating profit, SEKm

2,073

1,923

6,193

5,240

Operating margin, %

11.7

12.3

11.8

11.1

Operating margin excl. one-time items, %

11.8

12.9

11.8

12.2

Profit before taxes, SEKm

1,827

1,717

5,375

4,581

Net profit, SEKm

1,407

1,165

3,869

3,087

Basic earnings per share, SEK

3.01

2.47

8.27

6.57

Net sales change y-o-y, in SEK,

attributable to:

Volume

Price/
mix

Structure

Currency
effect

Total

Q3 2014

1.9%

1.3%

5.4%

5.3%

13.9%

Year to date 2014

3.8%

0.7%

4.7%

2.1%

11.3%

Sales in Q3 in local currency and excluding structure was relatively unchanged in Europe and Latin America, increased by 3% in North America, 8% in Asia and 7% in Middle East and Africa.
Manufacturing in the third quarter was relatively unchanged compared to last year.
Sales in the first nine months in local currency and excluding structure increased by 2% in Europe, 3% in North America, 1% in Latin America, 11% in Asia and 14% in Middle East and Africa.
Manufacturing in the first nine months was slightly higher compared to last year.

Outlook for the fourth quarter of 2014

Demand compared to the fourth quarter 2013
The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be slightly higher for Strategic Industries, relatively unchanged for Regional Sales and Service and slightly lower for Automotive.

Demand compared to the third quarter 2014
The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be relatively unchanged for Strategic Industries, slightly higher for Regional Sales and Service and slightly lower for Automotive.

Manufacturing
Manufacturing is expected to be slightly lower year over year and compared to the third quarter.

AB SKF is required to disclose the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for publication at around 13.00 on 15 October 2014.

SKF is a leading global supplier of bearings, seals, mechatronics, lubrication systems, and services which include technical support, maintenance and reliability services, engineering consulting and training. SKF is represented in more than 130 countries and has around 15,000 distributor locations worldwide. Annual sales in 2013 were SEK 63,597 million and the number of employees was 48,401. www.skf.com